Joint Response to the House Judiciary Committee on the State of Antitrust Law and Implications for Protecting Competition in Digital Markets

Abstract

Economic research establishes that market power is now a serious problem. Growing market power harms consumers and workers, slows innovation, and limits productivity growth. Market power is on the rise in a number of major industries, including, for example, airlines, brewing, and hospitals, where multiple horizontal mergers that were allowed to proceed without antitrust challenge have markedly increased concentration in important markets and facilitated the exercise of market power. Exclusionary conduct by dominant companies that stifles competition from actual and potential rivals — including nascent rivals with capabilities for challenging a dominant firm’s market power and firms with competing R&D efforts — impairs what is often the most important economic force creating competitive pressure for dominant firms. This concern exists in digital marketplaces. Platforms are often insulated from platform competition to a substantial extent by substantial scale economies in supply and demand (network effects) combined with customer switching costs.

Courts have contributed to increased monopoly power through decisions that have weakened the prohibitions against anticompetitive exclusionary conduct and anticompetitive mergers. The antitrust laws, as interpreted and enforced today, are inadequate to confront and deter growing market power in the U.S. economy and unnecessarily limit the ability of antitrust enforcers to address anticompetitive conduct. Many key antitrust precedents — particularly those precedents governing exclusionary conduct — rely on unsound economic theories or unsupported empirical claims about the competitive effects of certain practices. In part for this reason, the antitrust rules constructed by the courts reflect a systematically skewed error cost balance: they are too concerned to avoid both chilling procompetitive conduct and the high costs of litigation, and too dismissive of the costs of failing to deter harmful conduct. Excessively permissive precedents and unsound or unsupported economic claims have, in turn, encouraged overly cautious enforcement policies and overly demanding proof requirements and have discouraged government enforcers and private plaintiffs from bringing meritorious exclusionary conduct cases. The statement discusses a number of legal rules that are unsupported by or inconsistent with sound economic research that have contributed to overly permissive rules.

The signatories to this letter strongly believe that antitrust enforcement has become too lax, in large part because of the courts and that Congress must act to correct this problem. The statement suggests a number of reforms could be considered. We do not collectively or unanimously endorse any of these, though some of us have done so in other contexts. We do believe that Congress has a historic opportunity to identify adverse trends in judicial interpretation of the antitrust and correct problems—not just by overriding damaging precedents, but also by reshaping the antitrust laws more broadly to enhance deterrence of anticompetitive conduct.

Keywords: Antitrust Enforcement, Monopoly power, Antitrust Law, Digital Markets

JEL Classification: K2, K21, K23, K29, L4, L40, L41, L42, L44